OFFICE MARKET RESEARCH
Q1 2020 has been an unprecedented time for the UK office market, as well as the wider global property landscape.
Our research experts have produced two easily digestible thought pieces, to reflect on the past months. Both are considered in context of our core commercial markets outside of London - Bath, Birmingham, Bristol, Cambridge, Leeds, and Oxford - where our property professionals have the in-depth local knowledge to assess key contributors of change.
Q1 2020 OFFICE MARKET ANALYSIS VIDEO
Created by our Head of Research, Daniel Francis, our five-minute video reflects on take-up levels in Q1 2020, the outlook for demand, and how recent employment and construction trends will influence the market going forward.
For further information on the commercial market, or to speak to a property specialist, please contact us.
Q1 2020 OFFICE MARKET OUTLOOK SNAPSHOT
The quarter started on a positive note, with an elevated degree of business optimism following December’s decisive general election result, prior to the rapid escalation of the COVID-19 crisis.
Despite the increasingly challenging business environment, take-up across the Commercial Edge cities totalled 950,000 sq ft in Q1 2020. This was only 14% below the quarterly average over the previous five years, and only 5% below the 10-year quarterly average.
There was considerable variation between locations, however. Birmingham was the standout market in Q1, with lettings totalling 379,000 sq ft, 25% above the quarterly average over the previous five years. This figure was boosted significantly by BT’s 283,000 sq ft pre-let at Three Snowhill for its new Birmingham hub. This was the city’s largest ever single office letting.
Bristol also fared well in Q1, with take-up totalling 249,000 sq ft, in line with the five-year quarterly average and 10% higher than the 10-year average. The standout letting was 74,000 sq ft to lawyers Osborne Clarke, who took a pre-let at Halo in Cubex’ Finzels Reach scheme. The city centre continued its dominance, accounting for 82% of take-up over the quarter.
Data from MSCI Monthly Index reveals a slowdown in average office rental value growth in Q1. The UK office market outside of central London saw average rental values rise by 0.7%, only a modest deceleration on the 1.0% in Q4, but still slowest rate of growth since last August.
The value of office investment transactions outside of the Greater London market was £910 million in Q1, 45% below the quarterly average over the previous five years, and was the lowest figure recorded over that period (although only a little lower than in the post-EU referendum turmoil of Q3 2016).
Taking the overall UK investment market, overseas buyers accounted for 38% of the total value transacted, only slightly down on the previous quarter. Over the previous five years, overseas investors accounted for only a quarter of the total value of purchases.
Clearly, the picture will be very different in Q2. Nearly a quarter of UK employees are now officially furloughed, and with both the demand and supply sides of the economy in sharp contraction, output will fall by a record amount.
This unprecedented shock, and uncertainty around the shape of the recovery, will see a record low level of take-up in Q2, with market activity focused on lease re-gears, although some transactions are still progressing. Many occupiers will also be assessing their longer-term property strategies - the COVID-19 crisis will have lasting implications on the quantity and nature of space leased by corporates.
For further information on the commercial market, or to speak to a property specialist, please contact us.
Daniel is a member of the Investment Property Forum and the Society of Property Researchers.
Scott specialises in providing advice on agency and development matters to a wide variety of clients from private individuals and trusts through to property funds, institutions, companies and statutory authorities. He advises both owners and occupiers across public and private sectors.
Working at Board level with clients, Scott’s specialist areas include Business development, development of property strategies, property investment advice, advice in the marketing and disposal of property as well as property acquisitions.
Scott has a particular knowledge and understanding of the property market in the wider Oxfordshire region whilst also operating on a national basis on specific projects.
Will Mooney is a Partner based in Cambridge. He has over 27 years experience of the agency, investment, acquisition and development markets in this region and nationally. He specialises in the office, business and science park, hotel, retail and leisure sectors. Will provides strategic advice to many institutional, national and international clients, including ARM Holdings, The Downing College, Development Securities, Carisbrooke, University of Essex, Goodman, Greene King and Travelodge.
Three career highlights:
Over a career spanning nearly 30 years involving all forms of property from a nuclear bunker through to the vast majority of the County’s main business schemes, it is difficult to choose just three highlights; the following are certainly are worthy of note:
Letting acquisition, for SkyCaddie, at Haddenham:
I have chosen this as we were presented with a challenging brief by our client but I was able to use my market knowledge to unearth an off market opportunity that we subsequently acquired on very favourable terms.
Sale of Foxcombe Hall, Oxford: It is not often you get to market a University Campus and, as such, our disposal of the former Open University Campus at Boars Hill has been a highlight, working alongside our residential team on this high profile instruction.
Letting instruction, The Quadrant, Abingdon Science Park: I am currently leading this letting instruction where we have enjoyed a considerable amount of early success. I have chosen this as a highlight however as we have been able to provide clear letting advice, implement our recommendations and see the results.
Three career highlights 2016:
• Off-market acquisition prime Bath retail and office Investment
• Off-market acquisition prime Bath offices for growing Plc
• Brexit straddling Travel Lodge Investment acquisition
Caroline is a partner in the commercial team and is based in our Birmingham office.
John was previously a Director of the National Markets Office Investment department at BNP Paribas Real Estate and formally Strutt & Parker. He has over 15 years’ experience in the UK investment market, with a particular focus on business and office parks.
John advised on a range of high profile acquisitions and disposals of investment properties for a variety of key clients, including Arlington/TPG, Railpen, Dimah Capital, Orchard Street Investment Management, Hunter Real Estate Investment Management and Frasers Property.
At Carter Jonas, John will work with colleagues from across the business’s expanding commercial division - including teams in Bristol, Oxford, Cambridge, Birmingham and Leeds - building on existing experience to spearhead a dedicated and cohesive approach for private and public sector clients targeting commercial properties.
Michael is Head of Carter Jonas’ London Tenant Advisory Team and specialises in providing office search, lease negotiation, relocation management, rent review and lease restructuring consultancy services to office tenants based in Central and Greater London. He has over 20 years experience and his clients include international corporates such as Hitachi, Warner Bros and Hackett, not for profit organisations such as The Overseas Development Institute and The Nursing and Midwifery Council as well as owner-managed businesses including Wavex Technology, Credo Business Consulting and Turley Associates.
The range of consultancy services provided by Michael and his Team include advising on office availability, rents and rent free periods, undertaking property searches, representing tenants in lease negotiations, developing office relocation project plans, timetables and budgets and project managing each stage of the relocation process, including overseeing the pre-contract due diligence, and co-ordinating the activities of all those consultants who will be involved in the office move.
Three career highlights:
Acquisition of over 800,000 sq ft between 7 sites on behalf of one of the UK’s largest parcel operators, acquiring one freehold, two assignments (plus reversionary leases) and four new leases on buildings across the UK (Bodmin, Basingstoke, Chester Le Street, Grays, East London, Coventry and Rotherham).
Disposal of 3 million sq ft, 200 acres on behalf of SAPPI which was one of the largest Brownfield sites in Switzerland in 2012 sold for over €50 million.
Worked on one of the largest data centre/ colocation transactions in Singapore of 30,000 sq ft data centre within the Global Switch building on behalf of Asia Global Crossing.
Three career highlights:
Significant involvement in and preparation of the Ministry of Defence ‘Footprint Strategy’ announced in the House of Commons, during a 2 year secondment to DIO.
A number of Central Government and Local Authority Green Book Business Cases leading to relocations, change programmes and adopting new ways of working.
Sale of Centrepoint Tower to Almacantar under the Targetfollow administration
Richard Love is a Partner, Head of Building Surveying in our London Commercial Team. Richard joined from Watts Group PLC where he worked since 2010, most recently as director in it's project consultancy group. Richard's role is to provide building consultancy services, including relocation management, contract administration, design, strategic procurement and conservation advice with our clients.
Career Highlights:
Ealing Town Hall:
Full external restoration of Grade II Listed Victorian Gothic town hall building. The project arose from a survey identifying incidences of dangerous stonework and the project incorporated extensive masonry repairs, reroofing, redecorations, stained glass replacement, access improvements and drainage improvements. Works on site were delivered over an eight month period during which the town hall remained fully operational.
The Royal College of Psychiatrists HQ Relocation:
Project management services in respect of all aspects of the HQ relocation for this prestigious medical college. The relocation centred around moving into a 50,000sq ft 1980’s office building and delivered a comprehensive strip out and refurbishment including the creating of canteen and catering facilities, conference space, library including antique book collection and sublet space. The relocation was delivered in 9 months (inception to completion) and Richard also handled dilapidations matters on exit.
Career developments
Being appointed to the board overseeing the expansion of the Carter Jonas Commercial Division, which took place in early 2017. Also, managing the expansion of the Architecture and Building Consultancy team. The service line has doubled the number of specialists working within it in the last two years, becoming the largest team within the division. Further growth plans are currently in place for the next few years.
Three career highlights:
• Valuation of Green Property Company for acquisition purposes
• Valuation of Camden Markets Portfolio for loan Security purposes
• Acting as LPA Receiver on £400m property company prior to its sale